Now Draw This!

How complicated can it be to diagram the transfer of authority from the board to the CEO?

By Miriam Carver

May 22, 2012

This article was originally published in the March-April 2007 issue of Board Leadership.

Policy Governance is a model based on a set of principles that must be well understood to be used profitably. This is why we spend a good amount of time exploring those principles with our clients before attempting to help them apply the model. We have found that a lot of time can be wasted in the policy development and implementation phases of a board’s work when basic principles are not well understood. This is hardly a surprising discovery; it is difficult to implement principles one does not understand.

THE PRINCIPLES OF POLICY GOVERNANCE are not about organizational structure, but there is no doubt that they have structural implications. We know that giving a job to a CEO is for the purpose of holding that person accountable for the job’s successful execution. (It is hard to know why one would not agree with that, though apparently some people do not.) We know that if a board gives a CEO a job to do, it must also give him or her the authority to do that job. If it doesn’t, it cannot hold the CEO accountable. We know that if a board gives authority for the same job or parts of the same job to more than one person, no one is accountable for the completion of the job, and all have a place to hide from accountability.

These are simple management principles that led to the Policy Governance rules about board officers and committees. Readers familiar with the model already know these rules. But to be clear, the rules state that board officers and board committees, where they exist, have the purpose of assisting the board to do part of its own hands-on job, not the job that is delegated by the board to the CEO.

Traditionally, we commonly see boards setting up officer and committee positions for the purpose of advising the CEO or staff. CEOs and staff know that advice is input that can be accepted or rejected by the recipients. But CEOs and staff rarely believe it is acceptable to ignore board officer and committee input. Consequently, these committees and officers, no matter how well intentioned, are never truly advisory; they are in reality directive. Their use by a board thus results in multiple sources of instructions to the CEO or staff, thereby undermining the board’s ability to hold the CEO accountable. A CEO can always, in these traditional arrangements, argue that the decisions made at an operational level may be contrary to board expectations but were consistent with board committee expectations. This effect is magnified when the board’s expectations are less clearly stated than those of committees or officers.

Tracing a line of authority between board and staff becomes almost impossible with multiple “advisory” functions of board officers and committees. Indeed, traditional use of such mechanisms always produces blurred lines of authority.

Recently, in an engagement with a Latin American nonprofit board, John and I were asked to spend some time conducting interviews of individual board members. We don’t usually do this, as we rarely feel we can justify the time and expense to the client. But this client was certain that such a course of action was needed, so we acceded to the request. To each board member, we posed three questions. The first was “What would you like to tell us that you cannot say in front of your colleagues on the board, and why do you feel you cannot say it in front of them?” The second question was “What do you think your colleagues want to tell us in private, and why do you think they do not feel that they can say what they want to say in the presence of the board?” An analysis of answers to these questions proved very informative, but that is not the subject of this article.

The third question was prefaced with two observations. First, in any organization, there is a flow of authority from owners to the board. Everyone agreed with this observation. Second, we noted that the board must move authority from itself to lower organizational levels in order that staff can produce results. Everyone also agreed with this observation. These agreements prepared them for our third question. We gave each board member a pen and a sheet of paper featuring at the top a box signifying the ownership and just below it a box signifying the board. We reminded the board members of the many elements of the total organization that were currently in existence, including a human resource committee, a finance committee, four program committees, many individually authoritative board members, a CEO, and a large staff.

We asked them to draw these elements on the page and then to indicate the flow of authority from the board through or around all these elements to describe who was accountable for what. In effect, we asked them to draw a version of the organizational chart that showed the transfer of authority from board to the CEO and senior staff.

When we reported our findings to the entire board as a body, we were amused, as were the board members, to discover two major facts. First, every board member drew the chart differently. Though every chart bore a striking resemblance to a plate of spaghetti, there was little similarity in the board members’ conception of the flow of authority from the board through to second level-staff. Second, every board member, despite having drawn a chart that was virtually impossible to follow in terms of the transfer of authority, when asked who was accountable to the board for organizational success, answered, “The CEO.”

Our findings are not news to many organizations; this board, like so many others, had been attempting to hold a CEO accountable for organizational performance while giving partial, unclear, and even overriding authority to other board organs that were, though thus empowered, in no way held accountable for performance.

This is the state of traditional governance—frequently unclear, wasteful, and ultimately unaccountable. Would it come as a surprise to learn that this particular board was dealing with its third CEO in four years?